UK Policy and Regulation of Branded Content

Briefing Notes for Branded Content Research Network seminar 25 April 2017

Contents

INTRODUCTION..............................................................................................................................2

CURRENT RULES.............................................................................................................................3

1. TELEVISION............................................................................................................................31.1 PRODUCT PLACEMENT......................................................................................................................41.2 SPONSORED PROGRAMMES (INCLUDING ADVERTISER-FUNDED PROGRAMMES).............................................51.3 EUROPEAN UNION AUDIOVISUAL LEGISLATION.......................................................................................51.4 COMMERCIAL COMMUNICATIONS IN RADIO PROGRAMMING...................................................................51.5 VIDEO-ON-DEMAND/ON DEMAND PROGRAMME SERVICES (ODPS).........................................................6

2. NON-BROADCASTING COMMUNICATIONS AND PUBLISHING.................................................72.1 EDITORIAL/ADVERTISING...................................................................................................................72.2 EUROPEAN UNION LAWS...................................................................................................................92.3 PUBLISHING SELF-REGULATION AND CODES (UK).................................................................................102.4 JOURNALISTS’ CODES......................................................................................................................102.5 OTHER PROFESSIONAL GOVERNANCE..................................................................................................11

3. REGULATORY CHALLENGES OF MEDIA-MARKETING COMMUNICATIONS CONVERGENCE......123.1 EXISTING DIFFERENCES/ANOMALIES ACROSS UK REGULATIONS...............................................................123.2 REGULATION IN OTHER COUNTRIES....................................................................................................14

4. SELECTED ISSUES AND QUESTIONS...........................................................................................154.1 IDENTIFICATION AND LABELLING........................................................................................................154.2 RULE MONITORING AND ENFORCEMENT.............................................................................................154.3 CONSUMER ATTITUDES AND RESEARCH...............................................................................................164.4 REGULATING FOR THE INTEGRITY OF CHANNELS OF COMMUNICATION......................................................164.5 PR SOURCES AND EDITORIAL............................................................................................................17

4. RESEARCH NEEDS AND ACADEMIC NETWORKING...............................................................18

Table 1: Regulation of Branded Content

1

IntroductionBranded content, native advertising and other fast-evolving forms have intensified the challenges to the separation of editorial and advertising that were already being felt across the legacy media of print and television. UK media governance has historically benefitted from clear demarcation between marketers’ sponsored content and the media’s own editorial content.

How is the blurring of media and marketing communications addressed across UK regulation and governance?

Are the existing regulatory arrangements appropriate and effective?

What are the challenges for UK regulatory arrangements?

Across digital media new forms of integrated advertising are developing rapidly. Boundariesbetween media and advertising are being tested, crossed, redefined, and erased. Pressures on marketers to find effective ways to reach prospective purchasers and pressures on media to attract advertising finance and accommodate marketers are occurring in contexts of disruption and change in markets, in policy and in creative communications practices and use. Within the overall convergence of media and communications industries and cultures, the convergence of media and marketing is gathering pace across the various dimensions of ownership, work practices and values, cultural forms and user engagements. The emergence of new forms and practices of integrated advertising raise a host of issues ranging from consumer awareness to editorial independence and creative autonomy

The integration of media and advertising is not new but it is intensifying. Branded content isoccurring in different forms across news media, entertainment and social media. Emergent forms include ‘native advertising’ which describes various forms integration of advertising and content especially on social media. This is an online variant of advertorials, where advertisements follow the form and user experience associated with the context in which they are placed. In digital journalism the range of practices and norms is highly diverse but forms of branded content, native advertising, sponsored features have rapidly become established. In entertainment media, marketing integration includes advertiser-financed television, product placement, virtual advertising, advergames, and beyond.

The Branded Content Research Network is an academic network project funded by the UK Arts and Humanities Research Council. The network seeks to bring together academic researchers, industry and civil society

2

interests to explore the practices and implications of branded content, native advertising and the convergence of media and marketing communications.

This is a working document that seek to summarise existing regulations and set out issues for debate. There may be inaccuracies or omissions and so this document will be revised after the 25 April 2017 event.

Prepared by Prof. Jonathan Hardy, Principal Investigator, Branded Content Research Network j.hardy@uel.ac.uk

3

CURRENT RULES1. TELEVISION Commercial communications are subject to Ofcom’s rules on the amount and scheduling of advertising, a cross-promotion code and rules on sponsorship and commercial references in programmes. Advertising on television and radio is regulated by the Advertising Standards Authority in accordance with the UK Code of Broadcast Advertising (BCAP) drawn up by the Committee of Advertising Practice. Ofcom’s rules implement European Union regulations set out in the Audiovisual Media Services Directive. The relevant rules are set out in two main documents, Ofcom Code on the Scheduling of Television Advertising (April 2016), Ofcom Broadcasting Code (May 2016). Section Nine of the Broadcasting Code concerns commercial references in television programmes and includes rules on product placement, sponsorship and advertiser-funded programmes and related matters.

Principles

‘To ensure that broadcasters maintain editorial independence and control over programming (editorial independence). To ensure that there is distinction between editorial content and advertising (distinction). To protect audiences from surreptitious advertising (transparency). To ensure that audiences are protected from the risk of financial harm (consumer protection). To ensure that unsuitable sponsorship is prevented (unsuitable sponsorship)’. 

Identification of advertising

‘Broadcasters must ensure that television advertising and teleshopping is readily recognisable and distinguishable from editorial content and kept distinct from other parts of the programme service. This shall be done by optical (including spatial) means; acoustic signals may also be used’.

‘Integrity’ of programmes

‘Rule 8. Where television advertising or teleshopping is inserted during programmes, television broadcasters must ensure that the integrity of the programme is not

4

prejudiced, having regard to the nature and duration of the programme, and where natural breaks occur’

Editorial control

‘There may be circumstances in which it is acceptable for a person or organisation other than the broadcaster or programme-maker to provide input into the editorial of a programme. For example, in the case of an advertiser-funded programme. However, in all cases broadcasters are responsible for the programmes they transmit. Therefore, while other parties may contribute to programme content, broadcasters must retain ultimate editorial control over the programmes they transmit’ (Ofcom Guidance Note on Commercial Communications 1.11, emphasis added).

1.1 Product PlacementOfcom defines product placement as ‘[t]he inclusion in a programme of, or of a reference to, a product, service or trade mark where the inclusion is for a commercial purpose, and is in return for the making of any payment, or the giving of other valuable consideration, to any relevant provider or any person connected with a relevant provider, and is not prop placement’ (Ofcom Broadcasting Code 2016).

In accordance with European Union legislation (AVMSD) product placement is permitted (subject to restrictions on programme type and products) but there must be no undue prominence, no promotional references (i.e. encouragement to purchase) and the ‘ultimate editorial responsibility’ of the broadcaster must be upheld so that any placement is editorially justified.

Rules (Ofcom Broadcasting Code)9.6 Product placement is prohibited except in the following programme

genres: a) films; b) series made for television (or other audiovisual media services); c) sports programmes; and d) light entertainment programmes. 

Product placement is not permitted in the following programme genres: news, current affairs, consumer advice, children’s, religious programmes

Editorial control must remain with the broadcaster

5

Rule 9.8 Product placement must not influence the content and scheduling of a programme in a way that affects the responsibility and editorial independence of the broadcaster.Ofcom Guidance note, ‘There must always be sufficient editorial justification for the inclusion of product placement in programmes. In particular, editorial content must not be created or distorted so that it becomes a vehicle for the purpose of featuring placed products, services or trade marks’. 

No ‘undue prominence’

References must not be promotional

Identification

9.14 Product placement must be signalled clearly, by means of a universal neutral logo, as follows: a) at the beginning of the programme in which the placement appears; b) when the programme recommences after commercial breaks; and c) at the end of the programme. 

A universal logo must be displayed in accordance with detailed Ofcom rules

1.2 Sponsored programmes (including advertiser-funded programmes)

‘The rules seek to ensure editorial independence is preserved and a distinction is maintained between editorial and advertising. They also aim to protect against unsuitable sponsorship, and to ensure that sponsorship arrangements adhere to the principle of transparency’. ‘With the exception of the sponsorship credits, any reference to a sponsor that appears in a sponsored programme as a result of a commercial arrangement with the broadcaster, the programme maker or a connected person will be treated as product placement and must comply with Rules 9.6 to 9.14’. 

1.3 European Union audiovisual legislation

Audiovisual Media Services Directive, Article 10 1. Audiovisual media services or programmes that are sponsored shall meet the following requirements:(a) their content and, in the case of television broadcasting, their scheduling shall in no circumstances be influenced in such a way as to

6

affect the responsibility and editorial independence of the media service provider;(b) they shall not directly encourage the purchase or rental of goods or services, in particular by making special promotional references to those goods or services;(c) viewers shall be clearly informed of the existence of a sponsorship agreement. Sponsored programmes shall be clearly identified as such by the name, logo and/or any other symbol of the sponsor such as a reference to its product(s) or service(s) or a distinctive sign thereof in a appropriate way for programmes at the beginning, during and/or at the end of the programmes. […]4. News and current affairs programmes shall not be sponsored. Member States may choose to prohibit the showing of a sponsorship logo during children’s programmes, documentaries and religious programmes.

1.4 Commercial Communications in Radio Programming

Ofcom Broadcasting Code Section Ten: Commercial Communications in Radio Programming

Identification

‘10.1 Programming that is subject to, or associated with, a commercial arrangement must be appropriately signalled, so as to ensure that the commercial arrangement is transparent to listeners’.

For radio sponsor identification is referred to as ‘signalling’. Signalling involves considerations of Wording; Positioning; Frequency; Identity. Under signalling, the Broadcasting Code states:

Broadcasters are required to give, at appropriate times, clear information within programming, to inform listeners of any commercial arrangement affecting that programming.

The rules on radio sponsorship contain the same rules as television concerning product placement but do differ on the promotion of sponsor’s products or services within programmes.

All promotion of a sponsor’s product or service within programming must be scripted and copy cleared for broadcast either centrally or locally in the same way as advertisements. A presenter may front or voice a sponsorship promotion or tag during his/her programme as long as the item is clearly not a part of normal editorial. This separation or distinction can be achieved by voice inflection, pauses, tone or jingles. Listeners must clearly be able to understand that this is a ‘sell’, set apart and distinct from normal output, and stations and presenters should not attempt surreptitious endorsement or product placement within programming.

7

(Ofcom Radio Sponsorship Rules)

Principle of Transparency

‘Listeners should know when material is broadcast in return for payment or other valuable consideration. Signalling is the means by which transparency is achieved. Transparency of a commercial arrangement should be achieved through the appropriate signalling of a brand, trademark, product and/or service of a third party (or third parties) that has paid for broadcast exposure – by, for example: including a sponsorship credit; reference to the donor of a prize; the promotion of a premium rate number for listener interaction in programming’.

Distinction of editorial and advertising

10.2 Spot advertisements must be clearly separated from programming.10.3 No commercial reference, or material that implies a commercial arrangement, is permitted in or around news bulletins or news desk presentations’.

(Exceptions to 10.3 This rule does not apply to ‘reference to a news supplier for the purpose of identifying that supplier as a news source’; ‘…stations may credit news sources with a simple single acknowledgement of the news provider, whether a news agency or local newspaper. This is not regarded as sponsorship, as long as the provider has not paid for the credit and it is not presented in a way which appears to suggest that the provider has paid for the credit’ (Ofcom Radio Sponsorship Rules). So a news supplier can be referred to for the purpose of identification. There is no requirement to identify the supply of PR sourced material.

Payola (commercial arrangements made by third-party agent for music to be featured in playlists or programmes) is prohibited (Rule 10.5 ‘No commercial arrangement that involves payment, or the provision of some other valuable consideration, to the broadcaster may influence the selection or rotation of music for broadcast’).

1.5 Video-on-demand/On Demand Programme Services (ODPS)

Video-on-demand/ODPS services were subject to co-regulation by ATVOD and Ofcom but are now regulated entirely by Ofcom. Newspaper publishers resisted being subject to ATVOD regulation. Currently none of the major UK news publishers are listed as regulated ODPS.

Commercial references in VOD services are subject to the Broadcasting Code.

8

2. NON-BROADCASTING COMMUNICATIONS AND PUBLISHING

2.1 Editorial/Advertising

The UK Code of Non-broadcast Advertising and Direct and Promotional Marketing (the ‘CAP Code’) applies to marketing communications but not to editorial content, news or public relations materials.The advertising self-regulatory system has always asserted that its rules apply to marketing communications but not editorial. This has been upheld on the grounds of non-interference with freedom of expression and editorial freedom. This approach was tested with the growing complaints about communications on marketers’ websites (‘owned’ media) which fell outside the code. In 2010 the ASA’s digital remit was extended to cover marketing communications in marketers’s owned media.

Advertorials/Native Advertising

An advertorial is an advertisement feature, announcement or promotion, the content of which is controlled by the marketer, not the publisher, that is disseminated in exchange for a payment or other reciprocal arrangement (CAP Code Introduction III. K). 

The Committee on Advertising Practice (CAP) now draws a distinction between advertising and sponsored content. The CAP guidance on social media states ‘[s]ponsorship only has the ‘payment’ element and leaves editorial control entirely with the creator; these are not ads for the purposes of the CAP Code’. 

‘Ads are ads.  Sponsorship is sponsorship.  Labels that describe an ad as ‘sponsored’ are likely to break the rules in the CAP Code which require ads to be obviously identifiable. For the avoidance of doubt, this advice applies across all non-broadcast media, not just content on social media.’ (CAP Guidance 2016, ‘Is your ad 'obviously identifiable?' Here’s why 'Spon' is not 'ad')

[Opinion: The CAP has sought to circumscribe the conditions in which content funded by brands needs to be identified to consumers. This means a sharper distinction between advertising (requiring identification) and sponsored content. One positive outcome is that the CAP/ASA warn against any labelling that disguises advertising or is otherwise unclear to consumers. So, terms like ‘sponsored by’ ‘brought to you by’ are not permitted where the relevant content is controlled by brands and hence advertising/advertorial. However, there are two main negative outcomes. First there is a shift and diminution in the requirement to identify sponsored content. This means that content supplied or paid for by brands

9

can be published without identification where there was no ‘control’ exercised over editorial content by brands. The second negative outcome is that the rules on identification of ‘sponsored’ material are uncertain with no clear or consistent labelling proposed.]

Determining control

The ASA adopts a two –part test for ‘advertorial’ content: payment and control. Control is the main determining factor in the requirement to identify marketing communications, since it is possible for brands to have a payment or transactional relationship with a publication but for this not to be required to be identified as marketing communications.

The guidance on what constitutes control is not entirely clear or consistent. Some CAP guidance suggests that any evidence of brand involvement in editorial constitutes control. The CAP guidance states:

If a brand requires that they have sight of the material prior to publication (allowing them to make changes), restricts the publishers ability to refer to competitors, provides ‘key messaging’ and retains the copyright and other intellectual property rights over the content, the ASA is likely to consider there to have been ‘editorial control’ by the brand (Alpro (UK) Ltd, 21 September 2016). Similarly, the ‘publisher’ being provided with a detailed ‘brief’ or the content being subject to prior agreement with the brand’s marketing team, is likely to be considered ‘editorial control’ by the brand (Mondelez UK Ltd, 26 November 2014; Nike (UK) Ltd, 20 June 2012).

Elsewhere, the threshold is at or closer to ‘complete control’.

The CAP Guidance Note ‘Advertisement Features’ states ‘A good benchmark is whether or not the company has final approval of text and any visuals used. For example, a company might provide information to a journalist which is then used as the basis for an article or a publication might ask for a fee to reproduce a photograph or cover a story. Neither scenario would make the resulting article an advertisement feature. If, however, the company was permitted to have complete control over the content of the article, the result would be an advertisement feature’. emphasis added) 

Issues: Determining the extent of control is difficult for those outside the marketer-agency -media relationship.

There is a lack of indicators for external verification of rule adherence. This is a problem because there are pressures and incentives that can

10

lead the parties to the transaction to seek to avoid overt labelling of content as marketing communication.

The parties trusted to adhere to the rules include those who may be expected to have a variety of interests in non-disclosure. It is also the case that there are motivations towards disclosure concerning not only adherence to professional rules and regulatory standards but also maintaining reader trust in transparency and standards. As the CAP acknowledges in its guidance on advertisement features, the value of ‘native’ advertising is that it draws on the credibility associated with the publication.

Whether they are referred to as advertorials, advertisement features, advertisement promotions or the publisher’s promotion, the appeal of advertisement features is that they allow marketers to draw on the credibility that is lent by the publisher to the product or service marketed. The features that seem to be favoured most by marketers are those which successfully adopt the look of the host publication.

This statement refers to the ‘look’ of the publication and ‘credibility’ and so falls short of acknowledging the appeal to integrate advertising into editorial. However, the discussion of native advertising amongst marketers, agencies and media shows that the appeal to make adds ‘native’ to editorial content is very significant if not central.What are the problems and challenges in assessing editorial control?How can the extent of editorial control be assessed by users?How can the extent of editorial control be assessed for regulatory purposes?

In the Telegraph Michelin adjudication the ASA said that the label ‘ in association with Michelin’ was “insufficient to identify the content specifically as an ad” rather than sponsored editorial, over which the newspaper retained control. How well-defined is ‘control’ here?]

Transparency for consumers. how can consumers know what arrangements are in place? Without such knowledge, how can complaints processes work?

Labelling and identification

CAP guidance states ‘The label should make clear that the content is an ad.  There isn’t one specific label that advertisers and publishers must use, but ‘ad’ and ‘advertisement feature’ are suitable’.

Does the CAP/ASA favour adoption of more standardised labelling?

In the Buzzfeed Dylon adjudication the ASA ruled there was insufficient identification that this was marketer controlled content for someone coming to that content via a social media feed. What are the challenges of

11

managing identification across multiple platforms and varieties of assembly of content, for instance in native programmatic advertising?

2.2 European Union laws

Key legislation: Audiovisual Media Services Directive (2010/13/EU); Unfair Commercial Practices Directive (2005/29/EC); E-Commerce Directive (2000/31/EC).

The Unfair Commercial Practices Directive (2005) prohibits use of ‘editorial content in the media to promote a product where a trader has paid for the promotion without making that clear in the content or by images or sounds clearly identifiable by the consumer (advertorial)’.

IAB Europe (2016a: 13) summarises the requirements of EU law, paired with its own good practice recommendations, as follows:• Clear and prominent disclosure, which is necessary to ensure that the average consumer is properly informed and not misled as to the commercial nature of a native or content ad.• At minimum, disclosure should include a label description that clearly conveys that the content is commercial and has been paid for. The identity of the advertiser whose goods or services are being promoted should also be disclosed, either through a label, or through the use of visual cues such as a brand logo or name. In addition to the above, for native advertising formats, disclosure should alsoconvey the identity of the third party that has compiled the content (where appropriate).• Visual demarcations - such as the use of different design by the publisher like shading, different fonts, outlines or borders - should be used to help mark the content out as being different to other editorial content. This can aid in ensuring that disclosure is clear and prominent.IAB Europe (2016a) Native Advertising and Content Marketing. White Paper IAB Europe (2016b) How to Comply with EU Rules Applicable to Online Native Advertising 2.3 Publishing self-regulation and codes (UK)

A majority of the major news publishing groups in the UK have joined the Independent Press Standards Organisation (IPSO). IPSO has not sought recognition under the provisions established by Parliament following the Leveson inquiry into the culture, practices and ethics of the British press. IMPRESS is a self-regulatory organisation that has been recognised as an independent regulator under the post-Leveson arrangements. At present, most national newspaper groups have joined IPSO. The Financial Times and the Guardian have not joined any regulator and are pursuing self-regulation. IMPRESS has members across a range of publications including local news and magazines.

12

The codes for editors and publishers drawn up by IPSO and IMPRESS both build on the code previously administered by the Press Complaints Commission which closed on 8 September 2014 and was ‘replaced’ by IPSO.

Both IPSO and IMPRESS codes share continuities with the PCC Code in areas relevant to branded content. None of the codes address marketing communications. The codes do acknowledge that publications may be influenced by external interests and internal corporate/editorial considerations but only discuss that in specified areas, namely reporting defamation cases they have been party to, and financial reporting. Both IPSO and IMPRESS codes address the possibility of conflict of interest in respect of reporting on the outcome of an action for defamation to which it has been a party (as the previous PCC code did). Aside from financial reporting, no other conflicts of interest are identified.

The news publisher codes of IPSO and Impress require journalists to declare significant financial interests.

Impress, clause 13 states ‘The Clause requires journalists to declare any significant financial interest they or their close families have in any shares or securities about which they are writing, and not to trade in shares or securities about which they have written recently or about which they intend to write in the near future’.

IPSO, clause 13, includes the statement ‘They must not write about shares or securities in whose performance they know that they or their close families have a significant financial interest without disclosing the interest to the editor or financial editor.

2.4 Journalists’ Codes

Journalists’s codes refer to self-regulatory codes, drawn up by journalism trades unions or professional associations, that are subject to various kinds of enforcement mechanisms.

The International Federation of Journalists Code states:

8.  The journalist shall regard as grave professional offences the following: plagiarism; malicious misrepresentation; calumny, slander, libel, unfounded accusations; acceptance of a bribe in any form in consideration of either publication or suppression (emphasis added). Declaration of Principles on the Conduct of Journalists (Adopted by 1954 World Congress of the International Federation of Journalists - IFJ. Amended by the 1986 World Congress).A broader principle is articulated as follows, ‘[t]o maintain their credibility with citizens and their integrity as professionals, journalists must remain independent of advertisers’ wishes or the strictly business concerns of their employers’ Croteau and Hoynes (2006: 170-1) The Business of Media, Thousand Oaks, CA: Sage. The European Federation of Journalists states that ‘[there

13

should be] no restriction or impediment to the exercise of professional journalism imposed on the editorial staff from internal sources with the intention of suppressing information regarding the financial affairs, business or other activities of the parent company or its business partners or of unfairly promoting the economic interests of advertisers, sponsors, or business partners’. European Federation of Journalists (2002: 44), Legislating for a Democratic Media in Europe, Brussels: EFJ.National Union of Journalists’ Code

Clause 8. Resists threats or any other inducements to influence, distort or suppress information and takes no unfair personal advantage of information gained in the course of her/his duties before the information is public knowledge.

Clause 10. Does not by way of statement, voice or appearance endorse by advertisement any commercial product or service save for the promotion of her/his own work or of the medium by which she/he is employed.

2.5 Other professional governance

Various professional associations support relevant media/marketing communication activities with guides and in some cases codes of practice for members. These include:

Branded Content Marketing Association (BCMA)Chartered Institute of Public Relations (CIPR)Content Marketing Association (CMA)Institute for Practitioners in Advertising (IPA)Internet Advertising Bureau (UK)OutsmartProfessional Publishers Association (PPA)UK Association of Online Publishers (AOP)

International International Chamber of Commerce (ICC)Interactive Marketing AssociationWord of Mouth Marketing Association (WOMMA)

14

3. REGULATORY CHALLENGES OF MEDIA-MARKETING COMMUNICATIONS CONVERGENCE

Are the existing regulations keeping pace with media and marketing communications as they converge? What are the main challenges for the ASA/OFCOM/other regulators in addressing developments in media-marketing practice and in user/consumer behaviour?

The regulation of branded content is the responsibility of media regulators, advertising regulators and enforcement of Consumer Protection Regulations.

Is the current regulatory system adequate to the task of rule-making, rule adherence and rule enforcement?

Does the convergence of media and marketing communications require converging regulation?

There have always been differences in the way communication services have been identified and regulated. These reflect the historical origins, institutional arrangements, governing values, decisions and path dependencies associated with different media. Despite ongoing convergence across media and in regulation, significant differences remain. These are subject to a range of explanations and justifications, as well as criticisms. It is not the purpose of this paper to review these broader considerations. Rather, in the context of ongoing convergence, including the convergence of media and marketing communications it is important to consider the implications of differences and anomalies across regulation of branded content. There may be lessons that can and should be applied from one area of regulation to others. There are reasons to consider the benefits and disbenefits of greater consistency in regulatory rules, as well as in regulatory arrangements for compliance. Relevant considerations include consumer/user awareness, and access to regulatory information, help and support, enforcement and redress.

Table 1 below seeks to summarise some differences in regulatory treatment. The following section identifies and discusses some differences.

3.1 Existing differences/anomalies across UK regulations

i. Identification

15

Ofcom’s rules on product placement require that viewers are ‘made aware when a reference to a product, service or trade mark features in programming as a result of a commercial arrangement between the broadcaster or producer and a third party funder…’(Guidance note 1.5 Guidance Notes Section Nine: Commercial references in television programming, May 2016). By contrast CAP /ASA say readers only need to be aware of sponsored content when marketer ‘control’ is exercised.

ii. Application of rules on commercial references

Ofcom rules for commercial references in Content. ‘Rules 9.1 to 9.5 apply to all commercial references that appear within all programming. They apply irrespective of whether a reference is featured solely for an editorial reason or as a result of a commercial consideration. These rules help maintain a clear distinction between editorial and advertising content by limiting the impact commercial arrangements can have on editorial content’.

So, for Ofcom the rules apply based on the presence of commercial references in output, irrespective of transactional relationship, agency, purpose or motivation (although those considerations are relevant to the application of rules). For CAP/ASA the presence of commercial references is not governed by rules except where it falls within the scope of marketing communications. Editorial matter and public relations material are explicitly excluded from the CAP Codes.

iii. Distinction of editorial and advertising ( Separation principle)

Ofcom (Broadcasting Code) ‘Broadcasters must ensure that editorial content is distinct from advertising’.  Does that rule apply across non-broadcast content? Marketing communications must be identifiable but need not be distinct. Some argue that the rule is breached by paid product placement in broadcast and ODPS too.

iv. Marketer involvement in news and current affairs content

Sponsorship of news or current affairs programmes is prohibited by the EU (AVMSD) and Ofcom, but permitted in non-broadcast media by the CAP/ASA, IPSO and IMPRESS (?).

v. Brands’ owned media

The CAP/ASA has been through a process of extending advertising rules to marketers’ own communications online. The rules relocate but seek to maintain the editorial/advertising distinction by distinguishing the kinds of brand communications/self-promotion that is deemed marketing communications and so subject to ASA regulation, from the non-marketing/editorial material that is not subject to ASA regulation.

16

What rules apply to owned-media in respect of various types of broadcast licenses or On Demand Programme Services? What rules govern self-promotion by ODPS? The cross-promotion Code (last updated 2006) does not cover ODPS services. There are rules on third-party sponsorship and product placement but what about advertising and self-promotion by the service provider themselves? Under the 1990 Broadcasting Act broadcast licences cannot be held by ‘an advertising agency or any company controlled by such an agency or in which it holds more than a 5 per cent interest’. However other applicants can apply for an editorial service, a teleshopping service, a self-promotional service, or other forms such as gambling or interactive services.

vi. Brand presence and influence

In television and radio programmes advertisers can have ‘input’ but ultimate editorial control must lie with the broadcaster. In addition, marketers cannot speak on their own behalf outside of advertising (minutage) except when permitted in accordance with relatively strict criteria. Marketers can pay for placement in entertainment programmes but, in doing so, cannot make promotional claims about their products or services. Ofcom (2016a) states in guidance on the product placement rules (television):

the rules permit the paid-for placement of references in programmes to products, services and trade marks only (subject to various restrictions). They do not permit the paid-for placement of references in programmes to the aims, objectives, beliefs etc. of third party funders. 

By contrast, brands can pay for presence and editorial control in publishing and other non-broadcast media. The resulting communications need to be identified and marketing claims are subject to the CAP Code, but there are no comparable limits on references to the ‘aims, objectives, beliefs etc. of third party funders’.

3.2 Regulation in other countries

United States

Federal Trade Commission Guidelines on Native Advertising (December 2015)

Principle: "an ad shouldn’t convey that it’s anything other than an ad."

There should be no "implied or express representation that [a native ad] comes from a party other than the sponsoring advertiser.”

Disclosure for paid content-based advertisements should be:

17

• In clear and unambiguous language

• As close as possible to the advertisement to which they relate

Commission Enforcement Policy Statement on Deceptively Formatted Advertisements (December 2015) https://www.ftc.gov/public-statements/2015/12/commission-enforcement-policy-statement-deceptively-formatted

https://www.ftc.gov/tips-advice/business-center/guidance/native-advertising-guide-businesses

IAB Europe has produced a summary of native advertising in selected European markets that includes information on regulation and self-regulation in IAB Native Advertising and Content Marketing White Paper (December 2016)

18

4. SELECTED ISSUES AND QUESTIONS4.1 Identification and Labelling

The CAP/ASA is less prescriptive than the US Federal Trade Commission on labelling. The FTC declared that 'Promoted By' implies payment by a brand, but fails to communicate editorial control.

Various labels are used by content providers in the same sector (newspapers/news brands) and across sectors. Publishers information is idiosyncratic, like the Guardian’s divisions between ‘Advertiser content’ ‘Paid content’ and ‘Supported by’.

Should there be more standardisation of labelling (i.e. text used for description of advertiser-supported content)?

Should there be a universal logo (like Ofcom’s product placement logo)

Visual logos have been adopted in some countries (Poland, see IAB Europe). Can and should logos serve promotional purposes for brands?

IAB Europe identifies three components (i) Identification (‘The designation should clearly convey the identity

of the advertiser whose goods or services are being promoted and, where applicable, of the third party that has compiled the content’).

(ii) Label description (’The label should clearly convey that the native or content ad is a commercial communication’)

(iii) Visual Demarcation (for native advertising formats; e.g. ‘Use of different design such as shading, outlines or borders.

4.2 Rule monitoring and enforcement

The advertising rules allow for editorial content that is paid for by brands but not ‘controlled’ by brands to be carried without identification.

Is there sufficient transparency to enable consumers to know when the rules are breached?If not, are the other safeguards sufficient?

Studies of native advertising in the United States found high levels of non-compliance with the FTC rules introduced in December 2015. Of the online publishers offering native ads one study found 70 per cent were not compliant with the FTC’s guidelines (Swant 2016). A more recent study by MediaRadar, published in January 2017, found the level of non-compliance to be less, although still significant at nearly 40 per cent.

19

[Opinion. The CAP/ASA has recently introduced new guidance defining the conditions in which content funded by brands needs to be identified to consumers. One positive outcome is that the CAP/ASA warn against any labelling that disguises advertising or is otherwise unclear to consumers. So, terms like ‘sponsored by’ ‘brought to you by’ are not permitted where the relevant content is controlled by brands. However, there are three negative outcomes. First there is a diminution in the requirement to identify sponsored content: content supplied or paid for by brands can be published without identification where no ‘control’ is exercised over editorial content by brands. Can brand sponsored content really also be editorially independent? Second, this means the identification of brand ‘sponsored’ material remains uncertain. Third, for a system that relies heavily on complaints that will now be harder, with complaints based on the possibility that undisclosed brand control might have operated. There is a palpable risk that power shifts back to the parties to the transaction, away from regulators and public alike.]

4.3 Consumer attitudes and research

Consumer research shows a wide spectrum of responses to branded content and native advertising, from positive endorsement to confusion and failure to identify to criticism. That range will not be examined here but selected research highlights issues and user concerns. Audiences are often confused and annoyed, especially when they discover only after viewing content that it was sponsored. The Reuters Institute found that a third of UK adults have felt disappointed or deceived in this way, even more (43 per cent) in the US.

Hoofnagle C., Meleshinsky (2015) ‘Native Advertising and Endorsement: Schema, Source-Based Misleadingness, and Omission of Material Facts’, Technology Science. December 15. http://techscience.org/a/2015121503‘We found that just over one-quarter of respondents (27%) thought that the advertorial was written by a reporter or an editor. We find that labeling—even using a “sponsored content” disclosure—is insufficient to disabuse a significant minority ofconsumers about the provenance of the advertising material. Our findings are not generalizable, since we targeted the survey to internet users who appeared on marketing lists derived from behavioral tracking. However, our findings are compatible with those of other researchers who suggested that in addition to initial disclosures, elements in the advertorial itself must also signal to the consumer that this may be commercial material. (Hoofnagle and Meleshinsky 2015:2)

‘We are skeptical that “Sponsor Content,” “Promoted Post,” or “Paid Post” are effective disclosures in themselves, because they are ambiguous. These phrases do not identify the sponsor or payer. The words “Promoted Post” might mean that users “promoted” it by clicking on it frequently.

20

Nevertheless, our findings suggest that even with a prominent disclosure, a substantial number of consumers are misled about the advertising nature of advertorials’. (Hoofnagle and Meleshinsky 2015: 13)

4.4 Regulating for the integrity of channels of communication

A principal purpose of the advertising regulations is to ensure that marketing communications are readily identifiable as such. The regulations are designed to protect consumers. The ASA does not regulate editorial. UK Advertising self-regulation is not concerned with the implications for the channel of communication (or the specific media vehicle) but on the identification of marketing communications by consumers.

On native advertising the CAP guidance states:

The CAP Copy Advice team often receive enquiries about contextually targeted branded content, often referred to as “native” advertising. This approach goes beyond targeting consumers with ads which are relevant to the editorial they are viewing (for example, serving a banner ad for a car to someone reading an article aboutmotoring) and seeks to provide content generated by brands which doesn’t look out of place in the habitat within which it’s being viewed.This context driven approach isn’t a problem in and of itself, but marketers must be cautious that in seeking to make ads more inviting they do not camouflage advertisements.

However, there are critical concerns about native advertising and related branded content that go beyond concerns about disclosure and consumer identification of marketing communications. These include concerns about the implications for public media communication services and include issues of editorial independence and artistic integrity for creative producers and consumers, marketers’ control over communications space, and ‘share of voice’ between marketers and others. According to these perspectives, branded content undermines or threatens to undermine the integrity of channels of communication. That phrase appears in professional codes such as the International Public Relations Association which says its members should ‘Not engage in practice which tends to corrupt the integrity of any channel of communication’.

Another criticism is that native advertising can (further) undermine trust in public media, which has broader consequences for the ability of media to serve democratic purposes. One version argues that native advertising is parasitic and destroys what it feeds on: integrated advertising wants to harness reader trust but in doing so undermines it. As the legal scholar Tamara Piety puts it ‘native advertising threatens to spread advertising’s

21

low credibility to all content, thereby destroying the reason advertisers wanted to mimic editorial content in the first place’

Taken together these considerations identify different rationales for governance based on concerns to safeguard qualities of the communication vehicle or platform, not just protect consumers.

4.5 PR sources and editorial

The CAP code does not apply to PR-sourced material that is deemed to be editorial matter. The code not only allows PR-sourced material but also payment by the publication to cover stories. This means that payments such as colour-separation charges are permitted. More broadly, it permits stories that are paid for by brands to be carried without any identification, provides the editorial content is not ‘controlled’ by the brand.

CAP guidance ‘Recognising Ads – Advertisement Features’ states:

For example, a company might provide information to a journalist that is then used as the basis for an article, or a publication might ask for a fee to reproduce a photograph or cover a story, but neither scenario would necessarily make the resulting article an advertorial within the remit of the CAP Code. If a travel journalist was given an expenses-paid holiday by a travel company in the hope that a favourable article would be written, the resulting article would not be considered an advertisement feature if the company had not agreed its content. However, if it was subject to the company’s approval prior to publication, the copy would be subject to the Code. Also, if a brand sponsors an event which is newsworthy and journalists decide to write about it of their own accord, this is genuine editorial rather than advertising covered by the CAP Code.

Should there be labelling to identify ‘churnalism’, material supplied by PR sources that constitutes the predominant content of an ostensibly editorial item?

Churnalism: ‘A form of journalism in which press releases, wire stories and other forms of pre-packaged material are used to create articles in newspaper and other news media in order to meet increasing pressures of time and cost’ (https://www.collinsdictionary.com/submission/6873/Churnalism)

For broadcast service Ofcom allows for guests’ ‘plugs’ to be acceptable, stating ‘it is common for celebrity guests on chat shows and magazine-style programmes to refer to their latest venture. This is often an autobiography or an artistic endeavour directly linked to the guest’s profession, e.g. an actor discussing their latest film or play. In most cases such references will be justified editorially. In all circumstances broadcasters should ensure that any references to products, services or

22

trade marks are appropriately limited so as not to become unduly prominent’ (Ofcom 2016a). 

4. RESEARCH NEEDS AND ACADEMIC NETWORKING

How would you characterise the state of existing research on matters relevant to the regulation of branded content, native advertising and the integration of media and marketing communications?

What are some of the key research needs?

What role can and should academic research play?

How would you describe your own/your organisation’s relationship with academic researchers?

Are there forms of exchange and collaboration that would be welcomed (and which the Branded Content Research Network could help to promote and foster)?

23

Table 1. Regulation of Branded Content

Media form/activity Description Television Video-on-demand /ODBS

Radio Periodical Publishing Internet (other)Online/mobile

OOH(out-of-home)

REGULATION of Branded Content (overall)

HIGH HIGH HIGH MEDIUM MEDIUM LOW

Brand-owned content (Advertiser owned & operated)

No – advertising only (Ofcom)Broadcasters must retain editorial control

No (Ofcom)Rules prevent advertiser as licensee, but media/adv mix permitted (?)

No (Ofcom) Yes (ASA CAP Code) Yes (ASA CAP Code for ‘marketing communications’).Non-Ofcom reg. AV content

Yes(ASA CAP Code)

Publisher Controlled Content (Publisher-hosted and/or made)

‘(sometimes called ‘supported’ or ‘sponsored’) publisher made, looks like surrounding editorial, enabled by brand but may have been produced even without brand funding publisher editorial control and sign-off’ (IAB 2016a)

Yes (Ofcom) Yes (Ofcom) Yes (Ofcom) Yes (ASA CAP Code/Guidance); Publisher codes (no detailed rules in IPSO or Impress codes)

Yes (ASA CAP Code)

Yes (ASA CAP Code)

Advertiser-controlled commercial content (Publisher-hosted and/or made)

‘Advertorial’, ‘ad feature’, ‘paid content’[‘can be made by publisher and/or brandbe made by publisher and/or brand • advertiser editorial control and sign-off’] (IAB 2016a)

No – advertising only (Ofcom)

No – advertising only (Ofcom)

No – advertising only (Ofcom)

Yes (ASA CAP Code) Yes (ASA CAP Code)

Yes (ASA CAP Code)

Joint publisher/advertiser-controlled commercial content

‘(sometimes called ‘sponsored’ or ‘ad feature’)' • can be made by publisher and/or brand, enabled by brand but may have been produced even without brand funding • publisher and brand editorial control • client consultation/publisher sign-off’ (IAB 2016a)

No (Ofcom) Broadcasters must retain ultimate editorial control of programmes, incl. advertiser-funded programmes

No (Ofcom) No (Ofcom) Yes (ASA CAP Code) Yes (ASA CAP Code)

Yes (ASA CAP Code)

24

Promotion of products and services within programmes

No (with limited exceptions); no ‘undue prominence’. Sponsor credits but no promo

No (with limited exceptions); no ‘undue prominence’. No sponsor promo in prog

Yes. Sponsor credits/sponsor promotion permitted (with rules; no news/ current affairs)

Yes (must be identified when advertiser exercises ‘control’)(ASA CAP Code)

Product Placement Yes (subject to restrictions on prog. type and products) but influence on editorial independence prohibited; no undue prominence; no promotional references

Yes (subject to restrictions on programme type and products) but influence on editorial independence prohibited; no undue prominence; no promotional references

Yes (subject to restrictions on prog. type and products) but influence on editorial independence prohibited; no undue prominence; no promotional references

Sponsorship of News/Current Affairs

Prohibited (EU; Ofcom)

Prohibited (EU; Ofcom)

Prohibited (EU; Ofcom)

Permitted (CAP/ASA)

‘Surreptitious’ advertising

Prohibited (EU; Ofcom)

Prohibited (EU; Ofcom)

Prohibited (EU; Ofcom)

Prohibited – but at issue

Native Distribution ad units

Automated & programmatic e.g. in-app, in –feed, promoted posts discovery, recommendation tools,

(Under review by Ofcom)

Yes (ASA CAP Code)

PR sourced material (‘organic PR’)

Yes Ofcom (2016a). Guests’ ‘plugs’ on chat shows usually ‘editorially justified’

Yes. Yes. Rules allowing identification of news sources

Yes (not subject to regulation by ASA, IPSO, IMPRESS)

Yes (no regulation)

Yes (no regulation)

Identification (marketers in editorial)

Yes. Mandatory universal logo (product

Yes. Mandatory universal logo (product

Yes, but no mandatory form of words

Yes. Required if ‘marketing coms’, but no mandatory logo or form of

Yes. Required if ‘marketing coms’, but no mandatory

Yes, but rules for new formats are unclear

25

placement) placement) words logo/wordsIAB (2016a) IAB UK Content & Native Definitions FrameworkOfcom (2016a) Guidance Notes. Section Nine: Commercial references in television programming (20 May), London: Ofcom

26